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RBI cuts off lenders from loan evergreening via AIFs
Mint Mumbai
|December 20, 2023
The Reserve Bank of India (RBI) has clamped down on lenders ever greening loans through the use of alternative investment funds (AIFS), a practice previously red-flagged by the stock market regulator.
From now, a lender will not be allowed to invest in the schemes of any AIF that has invested in a borrower or investee of that lender, a move the regulator said aims to address concerns of evergreening.
Mint reported in November 2022 that the Securities and Exchange Board of India (Sebi) had informed RBI about instances of non-bank financiers evergreening loans through the AIF route.
Evergreening refers to practices to mask the true extent of bad loans by allowing delinquent borrowers to take more loans and repay existing ones.
This story is from the December 20, 2023 edition of Mint Mumbai.
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